As colleges begin to send out financial aid award letters, now is as a great time to discuss financial aid. Listed below are four types of 'awards' typically found on a financial aid letter.
Scholarships
A scholarship is merit based, meaning, students have accomplished something. This may include:
- Academics
- Standardized Test Score (ACT/SAT)
- Unique Talent (Athletic, Performing/Visual Art)
Scholarships are awarded for various lengths. Make sure to investigate their stipulations. Regardless the length, scholarships do not need to be repaid to the school.
Grants
Based upon 'financial need,' grants, like scholarships, do not need to be repaid. They are the biggest reason to complete the FAFSA. These awards can be from the institution, federal or state government. There are 2 common federal grants:
- Pell Grant: Up to $5,920 (for 2017-18 school year) to students who demonstrate financial need.
- Federal Supplemental Educational Opportunity Grant: In addition to the Pell Grant, this award is up to $4,000 for families that demonstrate exceptional financial need.
Federal Work-Study
Students work an on-campus job and earn a specified amount. There are ample opportunities reserved for federal work-study students in places such as the admissions office, school cafeteria or recreation center. Students cannot earn in excess of the amount offered on the award letter.
Loans
To defray the remaining cost of attendance, colleges will most likely package loans into the award letter. The are three types of main loans.
- Direct Subsidized Loan
- Based upon financial need.
- 10 year repayment period Accruing interest is paid by the Department of Education until 6 months after a student leaves school.
- Loan limit is $3,500 to $5,500, depending upon the year in school.
- Direct Unsubsidized Loan
- NOT based upon financial need.
- Borrower is responsible for all interest, which accrues immediately.
- 10 year repayment period on this loan (including accrued interest) does not begin until a student leaves school.
- Award amount is up to $2000 a school year.
- Direct PLUS Loan
- For a student's parents/guardians.
- NOT based upon financial need.
- Borrower assumes all interest.
- The interest rate is slightly higher, but generally lower than a private loan.
- Maximum amount borrowed is the cost of attendance, minus any financial aid received.
When comparing financial aid award letters, do not compare the actual awarded amount. Compare the financial commitment between schools and the amount of loans the family will have to repay.
If you have questions regarding your family's financial aid award letter or how to prepare for the rising cost of college, contact us.
